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Brexit could help smaller banks if cash rules change, say finance experts

Published 20/07/2016

Metro Bank is one of several challenger banks seeking change
Metro Bank is one of several challenger banks seeking change

Britain's challenger banks could benefit from Brexit if it is used to overhaul financial rules to encourage competition from smaller players, according to the chairman of the Treasury Select Committee.

Andrew Tyrie, who chairs the Commons committee, said current financial rules could be placing smaller lenders at a disadvantage by taking a "one size fits all" approach.

He said: " The Bank of England and the Government both now need to consider whether the opportunity afforded by Brexit could enable the development of a regulatory regime less prejudicial to small and challenger banks."

His comments come after a group of challenger banks - including Metro Bank, Aldermore and Charter Savings Bank - wrote to Mr Tyrie in the wake of the Brexit vote, confirming hopes that an overhaul of financial rules would "result in a more proportionate approach to regulation of smaller banks".

They added: "This will help smaller banks and building societies compete more effectively and provide more credit to the economy."

In particular they are hoping for a reduction in onerous rules on how much capital should be held by banks, which are approved at EU level.

The group of banks believe the recent review of high street banking has failed to tackle the barriers to competition.

They said: "Without a far-reaching holistic approach, smaller banks will remain restricted to a narrow part of the market which is underserved by the larger banks."

"For the avoidance of doubt, we seek neither favours not any special treatment. All we ask for is a level competitive playing field," they added.

But while Brexit could create opportunities to overhaul rules for lenders, there are concerns that an interest rate cut - which is widely expected next month - would put even more pressure on profits for smaller players.

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